Note

– Discontinued Operations

July 2019

management and the Board engaged in a review of CTI Balloons and CTI Europe and determined that they are

not

accretive to the Company overall, add complexity to the Company's structure and utilize resources. Therefore, as of

July 19, 2019,

the board authorized management to divest of CTI Balloons and CTI Europe. These actions are being taken to focus our resources and efforts on our core business activities, particularly foil balloons and ancillary products based in North America. The Company determined that these entities met the held-for-sale and discontinued operations accounting criteria. Accordingly, the Company has reported the results of these operations as discontinued operations in the Consolidated Statements of Comprehensive Income and presented the related assets and liabilities as held-for-sale in the Consolidated Balance Sheets. These changes have been applied for all periods presented. The Company divested its CTI Balloons (United Kingdom) subsidiary in the

fourth

quarter

2019.

October 2019,

we determined that we would

not

renew our Trademark License Agreement with SC Johnson when it expired on

December 31, 2019.

Under this Agreement, we were licensed to manufacture and sell a line of vacuum sealing machines and pouches under the Ziploc® Brand Vacuum Sealer System. The terms of the Agreement included a run-off provision which allowed us to sell products under the Ziploc® trademark for

days after the end of the Agreement. Our exit of the Ziploc® product line is considered a strategic shift and will have a major effect on our operations and financial results on a go forward basis therefore, this product line has been presented as discontinued operations.

CTI Balloons recorded losses from discontinued operations, net of taxes of (

$433,000

) and (

$996,000

) for the

three

and

nine

months ended

September 30, 2019.

CTI Europe recorded a loss from discontinued operations, net of taxes of $(

76,000

) for the

three

months ended

September 30, 2020,

compared to a gain from discontinued operations, net of taxes of

$313,000

for the

nine

months ended

September 30, 2020.

The net losses, net of taxes, were (

$566,000

) and (

$1,735,000

) for the

three

and

nine

month periods ended

September 30, 2019,

respectively.

Our Ziploc product line recorded a loss from discontinued operations, net of taxes of (

$37,000

) for the

three

months ended

September 30, 2020,

compared to a loss from discontinued operations, net of taxes of (

$1,513,000

) for the

nine

months ended

September 30, 2020.

The net gain, net of taxes, was

$340,000

for the

three

months ended

September 30, 2019

compared to a gain from discontinued operations, net of taxes of

$625,000

for the

nine

-month period ended

September 30, 2019,

respectively.

Summarized Discontinued Operations Financial Information

The following table summarizes the major line items for the operations that are included in the income from discontinued operations, net of tax line item in the Consolidated Statements of Income for the

three

months ended:

	September 30, 2020			September 30, 2019
Income Statement
Net Sales	$	655,896		$	3,130,382
Cost of Sales		412,663			2,588,927

Gross profit (Loss)		243,233			541,454

SG&A		194,300			627,452

Operating income (loss)		48,933			(85,998	)

Other Expense		(10,848	)		(31,962	)

Total pretax income (loss) from discontinued operations		38,085			(54,035	)

Loss from classification to held for sale		(151,140	)		(604,483	)
Income Tax Expense		-			-

Net loss prior to non-controlling interest		(113,055	)		(658,518	)

Non-controlling Interest share of profit/loss		(72,211	)		(760,813	)

Net loss	$	(40,844	)	$	102,295

nine

months ended:

	September 30, 2020			September 30, 2019
Income Statement	$			$
Net Sales		2,328,341			10,191,188
Cost of Sales		2,527,937			9,607,692

Gross Margin		(199,597	)		583,496

Impairment of Long-Lived Assets		-
SG&A		1,049,295			2,025,778

Operating Loss		(1,248,892	)		(1,442,283	)

Other Expense		(33,301	)		(58,990	)

Total pretax loss from discontinued operations		(1,282,193	)		(1,501,273	)

Gain (loss) from classification to held for sale		82,545			(604,483	)

Net Income prior to non-controlling interest		(1,199,648	)		(2,105,756	)

Non-controlling Interest share of profit/loss		150,458			(837,136	)

Net Loss	$	(1,350,106	)	$	(1,268,620	)

The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations for each of the periods presented:

Yunhong CTI Ltd.

Consolidated Balance Sheet

	September 30, 2020			December 31, 2019
Balance Sheet
Assets
Current Assets
Cash on hand and Banks	$	222,707		$	4,307
Accounts Receivable		481,732			539,910
Inventory		-			74,383
Prepaid & Other		90,308			135,912

TOTAL Current Assets		794,747			754,512

NET Property, Plant, and Equipment		7,633			53,919

Other Assets
Operating lease right-of-use		151,817			220,541
Other		32,543			47,958
TOTAL Other Assets		184,360			268,499
TOTAL Non-Current Assets		191,993			322,418

Valuation Allowance on Assets Held for Sale		(238,354	)		(320,899	)

TOTAL Assets	$	748,386		$	756,031

Liabilities
Current Liabilities
Trade Accounts Payable		68,013			384,333
Operating Lease Liabilities - Current		89,119			203,291
Other/Accrued Liabilities		19,276			19,562
TOTAL Current Liabilities		176,408			607,187

Non-Current Liabilities
Operating Lease Liabilities - Non Current		62,698			17,250
Other Non-Current		34,676			32,317
TOTAL Non-Current Liabilities		97,374			49,567

TOTAL Liabilities	$	273,782		$	656,753

The cash flows related to discontinued operations have

not

been segregated and are included in the Consolidated Statements of Cash Flows. The following table summarizes depreciation from discontinued operations for each of the periods presented:

	Nine Months Ended
	September 30,
	2020		2019
Depreciation	$	320,731	$	266,784